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In Oildale, war isn’t over oil — it’s about water

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In Oildale, war isn’t over oil — it’s about waterLois Henry CALIFORNIAN COLUMNISTSure, Oildale has a reputation as a rough and tumble place. Brawling is kind of expected.But a water fight? In Oildale? Oh yes, and it’s gettin’ ugly. The two main water districtsup there are engaged in a bitter legal feud that will likely end up costing both entitieshundreds of thousands, if not millions, of dollars. Who do you think will ultimately bearthat cost? Anyone with a faucet who lives in the ’08, that’s who. And no matter who winsthis most recent lawsuit, filed last November, the same problems will still exist, all thesame complaints will eventually resurface and history will repeat itself over and over.That’s because North of the River Municipal Water District and Oildale Mutual WaterCompany are trapped in a seriously dysfunctional relationship.Oildale residents really need to get involved and demand a change in how the district andcompany do business. They’re the ones on the hook, after all.And I’m not just talking about the constant legal wrangling.The North of the River district, a public entity with elected board members who areanswerable to the public (hint, hint), needs to be watched — closely. One small peekunder the floorboards was enough to make me do a double take.The district spent more than $31,000 on travel for employees and board members in2008. They spent that much again in 2010. Most years the amount hovered around$15,000 a year. In the last two years the district has cut back on travel, relativelyspeaking. But if I paid property taxes in Oildale, which is one of the district’s mainfunding sources, I’d still question the nearly $10,000 spent on employee and boardmember travel this past year. I can’t think of any justification for a district with six (6!)employees to spend that kind of taxpayer money on travel every year.And that’s just one of the many brow-raising expenditures that surfaced after OildaleMutual got a whiff of what it felt was bad accounting and started asking questions back in2008, which led to the current lawsuit.The background:

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Oildale Mutual is a private, nonprofit company formed in 1919 to provide drinking waterto Oildale residents. By the early 1960s everyone could see that pumping groundwater tomeet growing demand was unsustainable.In 1969, the North of the River district was formed over essentially the same boundariesas Oildale Mutual and another water company, Highland Park.The district, as a public agency, was funded through property taxes and contracted withthe Kern County Water Agency to get water from the State Water Project. It then sold thewater wholesale to Oildale Mutual and Highland Park.Everything was working just dandy until 1981 when the district took over Highland Parkand got into the water retail business.That’s where the relationship with Oildale Mutual went south.Oildale Mutual was immediately concerned about how the district would be able toseparate its accounting between the wholesale and retail operations.Sure enough, billing got tangled and in 1983 Oildale Mutual sued.The lawsuit lasted a decade and resulted in a settlement agreement they’re still operatingunder today.Under the agreement Oil-dale Mutual pays the direct cost for all the water it uses, plus ashare of the district’s costs to get that water such as pipelines, tanks, equipment, upkeep,repair, office and personnel costs. Oildale Mutual also gets credited a portion of theproperty taxes collected by the district.That’s all complicated enough. But adding in the district’s retail business makes itdownright byzantine.In 2005, the district and Oildale Mutual increased the amount of water they buy fromKern County Water Agency and costs escalated. But the costs escalated far more thanOil-dale Mutual thought right, so in 2008, the company hired an accountant to audit theprior year’s billings from the district.The accountant found errors, lots of them.What those errors meant to Oildale Mutual was that the company’s customers werepaying the freight for the district’s retail customers, Oildale Mutual manager, DougNunnelly said.The district’s former general manager back then, Bill Miller, acknowledged the errors,according to Oildale Mutual’s lawsuit. He and Nunnelly worked together for two years tosort through the errors, Nunnelly said.

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Then in 2010, Oildale Mutual started asking for an in-depth accounting of a special fundknown as the Major Repair and Replacement Fund.Both entities were supposed to be setting money aside in that fund going back to 1993 forany kind of major repairs, as the name would suggest. Oildale Mutual wanted to knowhow much was in the fund as their accountant couldn’t discern that information from thedistrict’s ledgers.Suddenly, all progress came to a screeching halt, according to Nunnelly.That was in the spring of 2010. Miller, who’d been with the district nearly 20 years,retired in October 2010.Ever since, Nunnelly said, the district has refused to cooperate with Oildale Mutual, evengiving them runaround on straightforward public records requests.The district’s new general manager, David Aranda, sees things differently.He told me the district still acknowledges that with such a complex billing system thereare bound to be errors and they want to true those up.“But Oildale Mutual has never given us a bottom line,” Aranda said. “How much theyfeel they’re owed for which items in which years.”Instead, he said, the company keeps moving the target, asking for more and morepaperwork and seems to want to rehash ancient history going back 20 years.At its core, he feels the dispute is really Oildale Mutual’s dissatisfaction with theoperating agreement.Yes, Nunnelly said, the agreement does give the district a great deal of control. Thedistrict issues the bills and, other than squawking about some charges, Oildale Mutualbasically has to shut up and pay.But Nunnelly insisted the company’s questions about the major repair fund going back to1993 aren’t ancient history and aren’t about the contract.“That’s a straight-up accounting issue,” he said.As things heated up, the entities began a newsletter war. Customers started receivingletters last fall with each side hurling accusations at the other.

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Aranda thinks the newsletters, started by Oil-dale Mutual, are a propaganda campaignaimed at plowing the road for Oildale Mutual-supported candidates to try and knock offthree of the district’s board members up for reelection in November.Nunnelly doesn’t deny Oildale Mutual has an interest in seeing the district’s boardstacked with more Oildale Mutual-friendly members.And that’s not a bad thing, he said. Residents living in the district are also Oildale Mutualcustomers so having board members looking out for both would be good.Hmm. If that’s the case, I wondered, why have two entities serving the same populationfor the same purpose?It’s like watching two sides of the same coin having a tug of war.On that issue they both agreed, sort of.“I do believe that the proper solution, not only for this litigation, but for the good ofOildale, is that we need one consolidated water agency,” Aranda told me.That might be hard to achieve considering Oildale Mutual is a private, nonprofit companyand the district is a public agency, he said.Nunnelly liked consolidation too. Only for him, that would mean the district’s retailcustomers would be consolidated under Oildale Mutual.Once that happens, he said, the crazy, complicated accounting and billing systems goaway. The district would go back to being a straight wholesaler with one customer,Oildale Mutual.Each man, however, noted that such thoughts are considered radical, fightin’ words even.Yeah, well, it’s not like they’re sipping cocoa and braiding each other’s hair now.Opinions expressed in this column are those of Lois Henry, not The BakersfieldCalifornian. Her column appears Wednesdays and Sundays. Comment athttp://www.bakersfield.com, call her at 395-7373 or e-mail lhenry@bakersfield.com